By Yasuhiko Seki and Ron Harui Oct. 26 (Bloomberg) -- The dollar weakened against the euro and the yen as Asian stocks gained on signs the global economy is recovering, reducing demand for the greenback as a refuge. The dollar fell against 12 of the 16 major currencies before reports this week that economists said will show confidence among U.S. and French consumers rose, spurring investors to buy higher-yielding assets. The pound dropped versus the euro on concern Bank of England policy maker Adam Posen will today signal the bank may expand its asset-purchase program. The yen and euro gained after an official Chinese paper said the nation should boost reserves in the currencies. “Regional stocks are now rebounding strongly, which is supporting risk appetite,” said Yoh Nihei, trading group manager at Tokai Tokyo Securities Co. in Tokyo. “Given this backdrop, the dollar is easy to sell.” The dollar fell to $1.5039 per euro as of 11:56 a.m. in Tokyo from $1.5008 in New York last week. It earlier dropped to $1.5063, the lowest since August 2008. The U.S. currency declined to 91.60 yen from 92.06 yen. The yen traded at 137.85 per euro from 138.15. The pound dropped to 92.35 pence per euro from 92.02 pence. The U.K. currency earlier fell to 92.37 pence, the weakest level since Oct. 15. The MSCI Asia Pacific Index of shares climbed 0.9 percent after earlier falling as much as 0.4 percent. The Nikkei 225 Stock Average rose 1 percent. Household Sentiment A gauge of French household sentiment improved to minus 35 in October from minus 36 in September, a Bloomberg survey of economists showed before the Paris-based national statistics office releases the report tomorrow. The Conference Board’s index of U.S. consumer confidence increased to 53.5 this month from 53.1 in September, a separate Bloomberg survey showed before tomorrow’s report. The dollar also declined after the Financial News, a newspaper affiliated with China’s central bank, said the nation should raise the amount of yen and euro in its foreign-exchange reserves. China should keep the dollar as the main component of its reserves because the U.S. remains the world’s preeminent economic power, the Beijing-based newspaper reported. “The Chinese article revived concerns over the status of the dollar and triggered knee-jerk selling of the greenback,” said Yuichiro Harada, senior vice president of the foreign- exchange division at Mizuho Corporate Bank Ltd., a unit of Japan’s second-largest lender. China is the biggest international owner of U.S. government debt followed by Japan. Higher Rates The dollar earlier traded near a one-month high against the yen on speculation the Federal Reserve will increase interest rates sooner than some economists forecast. The Wall Street Journal said Fed officials are likely to discuss next month how and when to signal the possibility of higher U.S. interest rates. Members of the U.S. central bank are contemplating the best way to let the market know that a period of record-low rates will draw to an end, the Journal reported Oct. 24, without naming a source. The issue may be “on the table” when the Federal Open Market Committee meets Nov. 3-4. The Fed will increase the policy rate to 0.5 percent in the second quarter of 2010, according to economists surveyed by Bloomberg. The Bank of Japan is projected to maintain interest rates at least until the end of the first quarter of 2011. The Fed’s benchmark interest rate is near zero, compared with 3.25 percent in Australia and 2.5 percent in New Zealand, attracting investors to the South Pacific nations’ higher- yielding assets. The risk in such trades is that currency market moves will erase profits.

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